On Its Seventh Birthday, Bitcoin's Future Appears More Stable Than Ever

The volatility of the cryptocurrency has steadily declined over the last 18 months.

BTC Keychain (Flickr)

Bitcoin turned seven years old on Sunday, and, like a good seven-year-old, cooled its bones. The volatility of the cryptocurrency has steadily declined over the past year and a half.

Volatility is a way to measure security in a stock or currency using the price’s standard deviation. High daily volatility means your investment may flip in a matter of hours and leave you counting pennies. Low daily volatility means you can probably kick your legs back and watch your investment gradually grow — or, if it begins to take a turn south, you’ll have time to get out before you’ve lost too much.

Throughout its lifespan, investors have been quick to criticize Bitcoin for its extreme volatility. (“You’ll never make it to the big leagues, kid — you’re too hotheaded,” one can imagine investors saying.) This was a natural, albeit semi-unfair criticism. Natural because no investor will remain employed for long if they advise you to invest in a currency that fluctuates as much as the young Bitcoin did. Unfair because young stocks, currencies, and children are going to be relatively erratic when held up against the old and battered stocks, currencies, and men. There’s nowhere near as much trading going on, meaning that even a medium-sized stone tossed into the shallow pool will yield significant ripples.

30-Day BTC/USD Volatility (Blue) vs. 30-Day Gold/USD Volatility (Green)

But, over the past year, Bitcoin has matured. Its 30-day volatility rate has hovered around three percent over the past year, and the high, about one year ago today, was just under eight percent. For comparison, the U.S. dollar tends to stick at just under one percent. It remains volatile, but it’s becoming a more controllable beast.

There are also other promising factors: Bitcoin’s price and trade volume managed to recuperate after a holiday slump, and some forecasters have high hopes for the cryptocurrency this year.